Real estate owned reports: Overview, definition, and example
What are real estate owned reports?
Real estate owned (REO) reports provide a detailed record of properties that a bank, lender, or financial institution has taken ownership of, usually due to foreclosure. These reports list the properties that didn’t sell at foreclosure auctions and have become part of the lender’s inventory. They typically include details such as the property type, location, valuation, and current status.
For example, if a borrower defaults on a mortgage and the property fails to sell at auction, the lender repossesses it and adds it to their REO report.
Why are real estate owned reports important?
REO reports are important because they help banks, investors, and buyers track properties that may be available for purchase, often at a discount. Lenders aim to sell these properties to recover losses, making them potential investment opportunities. For financial institutions, maintaining an accurate REO report ensures they manage and offload these properties efficiently.
For businesses in real estate, knowing which properties are on an REO report can provide insights into market trends and potential buying opportunities.
Understanding real estate owned reports through an example
Imagine a bank forecloses on a home after the owner defaults on their mortgage. The property goes to auction but doesn’t receive a qualifying bid. The bank then takes ownership and adds the home to its REO report.
An investor looking for distressed properties checks the bank’s REO report, sees the home listed, and contacts the bank to negotiate a purchase. Since banks often want to clear these properties quickly, the investor might get a favorable deal.
In another case, a lender with a high number of properties in its REO report may indicate broader economic challenges, as many foreclosures suggest financial strain on homeowners.
An example of a real estate owned report clause
Here’s how an REO report clause might appear in a contract:
“The Lender shall maintain a real estate owned (REO) report detailing all properties acquired through foreclosure, including property descriptions, valuations, and current status. The Borrower acknowledges that any foreclosed property not sold at auction may be listed in the Lender’s REO report.”
Conclusion
Real estate owned reports track properties that lenders have repossessed due to foreclosure. They are valuable tools for financial institutions managing foreclosed properties and for investors seeking opportunities. By understanding these reports, businesses and individuals can identify real estate opportunities and gain insight into broader market conditions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.